False Claims Act

“We will continue to use the False Claims Act and all other civil legal tools at our disposal to address contractors that seek to avoid their disclosure obligations when selling products to the United States government.” -- DOJ Press Release (June 2, 2011) (emphasis added)

Overview

The False Claims Act, also known as the Lincoln Law is a Federal Law that imposes a liability of persons and companies who defaud the government. Wikepedia has an extensive write-up, providing the history, changes, examples, State False Claims acts, and covers this subject in detail. The link to wikipedia site is: [1].

Govt. Contracting (wiki) provides a more succinct summary of the law, and liabilities for breaking it.

Knowingly

The False Claims Act ("FCA") provides, in pertinent part, that: (a) Any person who:

• Knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval;

• Knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government;

• Conspires to defraud the Government by getting a false or fraudulent claim paid or approved by the Government;

• Knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government,is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person .

The terms "knowing" and "knowingly" mean that a person, with respect to information (1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information, and no proof of specific intent to defraud is required.

Liability

31 U.S.C. § 3729. While the False Claims Act imposes liability only when the claimant acts “knowingly,” it does not require that the person submitting the claim have actual knowledge that the claim is false. A person who acts in reckless disregard or in deliberate ignorance of the truth or falsity of the information, also can be found liable under the Act. 31 U.S.C. 3729(b). The False Claims Act imposes liability on any person who submits a claim to the federal government that he or she knows (or should know) is false. An example may be a physician who submits a bill to Medicare for medical services she knows she has not provided.

The False Claims Act also imposes liability on an individual who may knowingly submit a false record in order to obtain payment from the government. An example of this may include a government contractor who submits records that he knows (or should know) is false and that indicate compliance with certain contractual or regulatory requirements.

The third area of liability includes those instances in which someone may obtain money from the federal government to which he may not be entitled, and then uses false statements or records in order to retain the money. An example of this so-called “reverse false claim” may include a hospital who obtains interim payments from Medicare throughout the year, and then knowingly files a false cost report at the end of the year in order to avoid making a refund to the Medicare program.

Qui Tam Relators

In addition to its substantive provisions, the FCA provides that private parties may bring an action on behalf of the United States. 31 U.S.C. 3730 (b). These private parties, known as “qui tam relators,” may share in a percentage of the proceeds from an FCA action or settlement. Section 3730(d)(1) of the FCA provides, with some exceptions, that a qui tam relator, when the Government has intervened in the lawsuit, shall receive at least 15 percent but not more than 25 percent of the proceeds of the FCA action depending upon the extent to which the relator substantially contributed to the prosecution of the action. When the Government does not intervene, section 3730(d)(2) provides that the relator shall receive an amount that the court decides is reasonable and shall be not less than 25 percent and not more than 30 percent. The FCA provides protection to qui tam relators who are discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of their employment as a result of their furtherance of an action under the FCA. 31 U.S.C. 3730(h). Remedies include reinstatement with comparable seniority as the qui tam relator would have had but for the discrimination, two times the amount of any back pay, interest on any back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys’ fees.

Court Cases

United States v. United Technologies Corp. (S.D. Ohio 2012)

• Sixth Circuit decided in 2011: False statements in BAFO created FCA liability because they induced USAF to enter into contract
• On remand: Court finds USAF relied on false statements in finding pricing fair and reasonable, mistakenly paid/unjustly enriched contractor
• Not a TINA case – ASBCA earlier found that BAFO was not cost or pricing data

Hooper v. Lockheed Martin Corp. (9th Cir. 2012)

• False estimates/fraudulent underbidding to secure cost-type contract can violate the FCA
• Government knowledge/approval concerning testing procedures and use of open source software negated FCA claim.

Note: Claimed Negated because company disclosed...Disclosure is KEY

See Also

Forfeiture of Fraudulent Claims Act 28 USC $$2514